:: Update On DOL Audit Profiling & Investigational Focus

Aaron Juckett,One Stop ESOP Blog, provides an overview of key points noted during an April 15, 2008 presentation by Paul Windsor, an investigator from the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL). The program title, What to Expect from an Employee Benefits Security Administration Investigation, is undoubtedly an attention-getter.

The program was a part of the Spring Conference of the ESOP Association – Wisconsin Chapter. Don’t let the ESOP moniker put you off – the fiduciary and disclosure information is relevant and transferable to group benefit plan administration.

Among the items of interest to those working in the employee welfare benefits field:

  • What does the EBSA Investigate – What does the EBSA investigate?
    • Fiduciary Duty of Loyalty and Prudence (ERISA Section 404(a), 29 U.S.C. Section 1104(a) – Fiduciary duties – Prudent man standard of care)
    • Prohibited Transactions: Certain transactions between the plan and parties-in-interest are prohibited absent an exemption (ERISA Section 406(a), 29 U.S.C. Section 1106(a) – Prohibited Transactions – Transactions between plan and party in interest)
    • Conflicts of Interest (ERISA Section 406(b), 29 U.S.C. Section 1106(b) – Prohibited Transactions – Transactions between plan and fiduciary)
  • How Investigations are Identified – Investigations are identified through computer targeting (off of the IRS Forms 5500), referrals from the IRS and other agencies, information from the media, bankruptcy and other filings, complaints (participants, fiduciaries, informants, attorneys, etc.), and private lawsuits.

For the complete overview, see Aaron’s notes here.

Note: The issues of service provider compensation and potential prohibited transactions in the group benefit environment presents an important area of due diligence responsibility. For more on this topic, see the due diligence checklist on this site.

The “Consultant/Adviser Project” – This item is noteworthy in the audit context:

EBSA’s newest National Project will focus on the receipt of improper, undisclosed compensation by pension consultants and other investment advisers. EBSA’s investigations will seek to determine whether the receipt of such compensation violates ERISA because the adviser/consultant used its position with a benefit plan to generate additional fees for itself or its affiliates. EBSA may also need to investigate individual plans to address such potential violations as failure to adhere to investment guidelines and improper selection or monitoring of the consultant or adviser. The CAP will also seek to identify potential criminal violations, such as kickbacks or fraud.